Volkswagen has emerged from the biggest loss in its eight-decade history, reporting net income of €5.1bn for 2016.
The German carmaker managed to sell a record number of cars last year and overtake Toyota to be the world’s biggest carmaker, despite the fallout from the diesel emissions scandal in which it admitted to equipping 11m cars with test-cheating software. It sold 10.3m cars across its portfolio which includes the Audi, Porsche, Skoda and Bentley brands.
When VW reported a €1.6bn net loss for 2015, it was driven by a €16.2bn provision for the diesel emissions scandal. On Friday, VW booked a 2016 provision of €7.5bn, including €6.4bn for the diesel issue.
Operating profit before these special items was up 14 per cent to €14.6bn, a nudge ahead of forecasts and a new record for the company. Total revenue climbed 1.9 per cent to €217.3bn, ahead of estimates by €4bn.
“While the past fiscal year posed major challenges for us, despite the crisis the group’s operating business gave its best-ever performance,” said Matthias Müller, chief executive since September 2015.
Volkswagen also announced it has responded to pressure to reorient executive pay by implementing a “more capital market-oriented” pay system that would cap the salary of its chief executive at €10m and limit other management board members’ pay to €5.5m.
VW said this would reduce the maximum possible salary by 40 per cent and can “only be achieved if the group performs exceptionally well”.
VW came under attack last year after it revealed that 12 current and former board members were paid €63.2m in total for 2015 despite its worst financial year since the company was founded in 1937.
TCI, the hedge fund run by Sir Chris Hohn, referred to VW’s pay scheme last year as “corporate excess on an epic scale” and he blamed it for encouraging “aggressive management behaviour contributing to the diesel emission scandal”.
The criticism was renewed last month with the abrupt departure of Christine Hohmann-Dennhardt, who was brought in to head up compliance after VW admitted to cheating emissions testing. Ms Hohmann-Dennhardt left after a dispute over what her role was and she left with a pay package of more than €10m for just 13 months of work.
VW, which has the worst corporate governance rating in Germany according to Institutional Shareholder Services, said on Friday that its new scheme “takes its cue” from its peers on the Dax index of large German companies.
The carmaker said it would propose a dividend of €2 per ordinary share and €2.06 per preferred share. A year before these dividends were slashed to just €0.11 and €0.17, respectively.
For 2017, VW said it expected passenger car sales to slow in general, but that its own sales should “moderately exceed” last year’s. It projected sales revenue for the group to rise 4 per cent in 2017, and it offered conservative estimates for a return on sales between 6 and 7 per cent. Analysts have forecast a 6.9 per cent return on sales.
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